Taking Stock : Don’t be greedy when you’re scared – EURUSD
Contemplating if I have a personality disorder these days. Till I look at the EUR charts. It’s not me !
The market is bipolar and caught up with the frenzy of immediate gratification.
Uncertainty is a killjoy and we have been caught up with a period of prolonged uncertainty. Whether it was Greece Part I or Part II or now Part 5, or QE1 or QE2 or QE3, LTRO, the fiscal cliffs in US and Japan, the political transitions, or the imminent violence in the Middle East, it does not look like the future will be any rosier.
Eliminating the uncertainties one by one gives us fresh hope. But take a step back and a deep breath.
Millions of jobs have been wiped out overnight in some countries and transitions buy us time to hope.
I have been reading some articles lately and it appears that the market has gone as bonkers as me, suggesting “cockcoach” style portfolio management and trading on hope. Analysts themselves are also polarised as to what to expect next year with the optimist camp victorious at the moment. But all we need is another black swan event to throw a spanner in the works. Black swan events are getting more commonplace now because the market is so highly strung and one dimensional, there is no knowing where the next bogeyman is coming from.
Looking at the majors, everything is in overbought territory. EUR/USD, AUD/USD, Gold, Silver and USD/JPY. No sense in trading the S&P 500 or WTI crude etc because the EUR proxies for everything now.
I saw a hilarious comment on Twitter that a PHD ought to be done on the correlation between negativity and the age of the analyst (quote Conor Sen) – referring to Pretcher, Rogers, Roubini, Faber, Grantham etc. It got me thinking if I am missing out on some positive vibes these days.
Then I read how some traders are just trading on blind hope that things will fix themselves.
One last point: There’s always going to be big stuff to be freaked out about (The Euro crisis, war in the Middle East, growing inequality, gigantic debts, too big to fail banks, the end of clean water, a more politically polarized Washington DC, etc.). But folks who operate on the assumption that big issues will get resolved for the worse — merely because they can’t see a good fix — usually do worse than the people who just blindly hope that things get resolved well. Hope is a strategy
Black Rock has an interesting observation for us on trading on our emotions.
Source : https://www2.blackrock.com/us/financial-professionals/market-insight/chart-of-the-week/letting-emotions-dictate-your-portfolio?cmp=chartoftheweek&chn=AFF&c=twitter&utm_campaign=chartoftheweek&utm_medium=AFF&utm_source=twitter&sf7380445=1
Saxobank asked on Twitter what is the most outrageous prediction for next year. Some say EUR at 1.4 and Merkel buys a house in Greece, some say AAPL at 200 bucks, I say, a tidal wave of exasperation leading to a massive loss of confidence and massive global stagflation.
I am in the bear camp at the moment, not because I am that old. But because they say holidays can be life changing experiences and I saw some black swans in Melbourne. Until now, I thought they only existed in Perth ! The world can trade on hope, I am trading on superstition !
Selling EUR/USD now 1.2990.